Rumours of the death of IT departments are greatly exaggerated. It’s unlikely 10 per cent of IT departments will disappear off the face of the earth by 2011. But it’s quite likely true in the longer term.Text

IT World Canada spoke with four Canadian CIOs to get their reactions to Gartner’s predictions and Nicholas Carr’s “IT utility” analogy (see IT shops face fuzzy future): Dietmar Reiner of Ontario Power Generation (OPG), Loren Hicks of Lavalife, Linda Weaver of Smart Systems for Health Agency (SSHA) and Mauro Lollo of Unis Lumin Inc.

All four believe the timeline of Gartner’s prediction is premature. It’s unlikely 10 per cent of IT departments will disappear off the face of the earth by 2011 – a mere five years away. But they agreed it’s quite likely true in the longer term.

Moreover, they say, IT departments are already shifting away from their traditional role of looking after the guts and plumbing of systems to refocus on loftier business goals, thank you very much.

All are in total accord that IT departments must become more strategic. Like “motherhood”, they say, that’s an issue not worth debating.

But the devil, as always, is in the details. What does strategic use of technology really mean? Is outsourcing the answer to deal with those bits deemed non-strategic? Is IT comparable to electricity, a commodity that can be supplied via a socket, as Nicholas Carr, author of Does IT Matter, suggests? What is wrong with IT departments and why does everyone keep trying to fix them?

The body and soul of IT

The pattern of disappointment that reached its zenith in the go-go 90s is probably what has hurt IT the most, says Reiner, CIO at Toronto-based OPG. “IT has got this legacy of being nirvana and the thing that will get you to the Promised Land, and it’s never as perfect as the sales pitch,” he says. “But IT is here to stay. Now IT departments, that’s a different question.” IT is here to stay. Now IT departments, that’s a different question.Dietmar Reiner>Text

IT tends to be one of the largest supporting costs inside organizations, he says. Unlike other support functions such as HR and finance – which tend to be perceived as necessary evils and not services – sticker shock sets in when organizations see the IT price tag. “Because it’s big money, the questions about the value of IT get tougher and tougher, and that puts IT departments at the forefront.”

He says in the traditional, operational IT space – making sure boxes run and that someone is there to fix or replace them when something breaks down – outsourcing providers will likely take on a bigger role in the future serving companies such as OPG, which uses IT but is not an IT company per se.

But in the avant-garde, strategic space, he believes IT is beyond commoditization in many ways. Reiner is well-versed in the workings of both IT and electricity, and Carr’s comparison, he says, is interesting but limited. “I can see where the desire to draw the analogy comes from,” he says. “But not all of IT can be commoditized like electricity can. At the applications level, IT is different”

No one disputes certain generic elements such as financial applications, which are fairly standard from business to business, are commodities that are amenable to the utility model, says Reiner.

However, there are many critical applications that bring competitive advantage to the business, he says. But they run on the commoditized box, and the box sits inside the utility. Box and application are conjoined, like body and soul, and often inseparable. This makes clear delineations between strategic and non-strategic technology difficult. With electricity, by contrast, the device that consumes it is always separate and does not reside at the utility.

Reiner offered a concrete example. “In the wholesale electricity market, the price of the product and timing of the sale are based on market intelligence. That intelligence, in turn, comes from a bunch of data. We analyze it to put a value on our product, and that makes us competitive or uncompetitive. I think if it were all commoditized and everyone had the same information, the potential value would be eroded.”

Of Fords and Maseratis

Loren Hicks, CIO of Toronto-based Lavalife, presides over a proprietary system that has been custom-built over the years as the company rocketed from obscurity to prominence in the online dating space. The company uses an array of emerging technologies to reach its customers via Web, wireless, instant messaging and video.

“Many companies are driving Fords, all standard. At Lavalife, we built our own car. We had to, because no one else was doing what we do,” he says. “I work at a firm where all our products are customer-facing and technology-based, and I tell you, IT matters.”

Outsourcing is a red herring, he says, and an issue that has been over-blown. In his view, it is simply a different way of managing IT rather than disbanding it. The technology components that provide no competitive advantage can be treated like utilities, as Carr suggests, and decisions to keep them or farm them out are purely economic, he says.

“Who it is who provides Microsoft Word on your desktop is completely irrelevant. It’s important it gets done but the company doesn’t get a nickel of revenue from it.” I work at a firm where all our products are customer-facing and technology-based, and I tell you, IT matters.Loren Hicks>Text

In certain established industries, where the business processes and workings of IT are cut and dried, an in-house IT department brings no strategic advantage and makes little economic sense, Hicks says. In the oil refinery business, for example, the process controls and the technology needed to automate refining is an exact, well-known science.

“So does IT matter in that instance? Yes. But is it strategic? No. Could you outsource it? Yes. Could you have IT be part of the engineering department? Yes. Does it mean it’s not IT work? That’s debatable.”

Hicks points out that a redefinition of what constitutes IT work may be needed in the coming years as more and more aspects of modern life are computerized and connected and society grows more techno-literate.

“There’s a computer in your car. Does that mean your mechanic is now an IT guy when he’s checking your fuel emission system, which is all computer-controlled? It all depends on what you mean by IT specialist,” he says.

The yin/yang of IT

Linda Weaver, CIO at Toronto-based SSHA, says she agrees with Gartner’s predictions at a gut level, but sees difficult staff issues emerging as IT departments pare away lower-level work. As IT becomes more complex, staff must have a higher degree of knowledge to do the troubleshooting, assessment and analysis necessary to manage the more strategic aspects of technology, she says.Many IT departments will likely shrink by 10 per cent due to the loss of entry level positions used